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Unformatted text preview: through the two observations can be very di/erent from the true slope co-e cient when X j and X i are close. Because X 1 and X 2 are closer than X 2 and X 3 in this example, the maximum variance results when we choose i = 1 and j = 2 . Because the distance between X j and X i is the largest when we choose X 1 and X 3 , the minimum variance results when we choose i = 1 and j = 3 . (h) The OLS estimator in (b) has the minimum variance. 1 (i) Yes. The Gauss-Markov Theorem states that the OLS estimator is the BLUE. Because the two-point estimators are linear unbiased estimators, the variance of the OLS estimator must be smaller than or equal to the variance of the any two-point estimator. 2...
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This note was uploaded on 07/17/2008 for the course ECON 444 taught by Professor Ogaki during the Fall '07 term at Ohio State.
- Fall '07